Infotech firing again, profits defy gravity

Hirings show big jump, bottomline at 4-year high.

The information technology (IT) industry is booming again. Growth rates in revenues and net profits for the quarter ended September 2004 are at a four-year high.

Net profits as a percentage of sales have climbed to a seven-quarter high. More importantly, sensing better times ahead, IT companies are adding to their staff strength to ensure that growth doesn't slow down. The top four companies added 15,725 employees in the quarter ended September 2004, taking their cumulative employee strength to 123,285.

The 28 software companies that announced financial results for the quarter have posted a 39 per cent growth in revenues and a 44 per cent growth in net profit.

Infosys Technologies and Wipro have outperformed the sector averages. Tata Consultancy Services (TCS) could not be considered for this study as data on its financial performance in previous quarters were not available.

These 28 companies collectively posted a sequential quarter growth rate "" September 2004 over June 2004 "" of 12.94 per cent in revenues and a 16.86 per cent growth in net profits.

The three front-line IT companies, TCS, Wipro and Infosys Technologies, reported sequential quarter growth rates of over 10 per cent each in revenues and profits.

TCS tops the sequential quarter growth rate charts with revenue growth of 15.17 per cent and a net profit growth rate of 26.86 per cent. Infosys Technologies is close behind, with a 14.83 per cent rise in revenues and a 15.31 per cent rise in net profit.

Wipro's revenue rose 11.59 per cent and its profits increased 13.25 per cent in September 2004, compared with June 2004. Satyam Computer lagged behind, posting revenue growth of 9.93 per cent and a profit growth rate of around 9 per cent.

As for employee strength, Wipro added 5,500 employees in the September quarter, taking its head count to 36,768, Infosys added 5,010 (32,949), TCS added 3,974 (36,696) and Satyam Computer hired 1,241 more, taking its payroll strength to 16,872.

Despite the increase in the number of employees, the IT industry's net profit margin is at a seven-quarter high of 22.69 per cent. Salaries and wages, including travelling expenditure, increased to an all-time high of 46.7 per cent of total expenses.

Though employee costs for the top three IT firms accounted for over 50 per cent of their total expenses, their profit margins went up by over 100-200 basis points between the June 2004 and September 2004 quarters.